Company Quick10K Filing
Quick10K
Trico Bancshares
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$40.11 30 $1,220
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-21 Other Events, Exhibits
8-K 2019-05-21 Shareholder Vote
8-K 2019-05-15 Officers
8-K 2019-05-06 Regulation FD, Exhibits
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-02-14 Regulation FD, Exhibits
8-K 2019-01-30 Regulation FD, Exhibits
8-K 2019-01-29 Earnings, Exhibits
8-K 2018-11-28 Other Events, Exhibits
8-K 2018-11-08 Regulation FD, Exhibits
8-K 2018-10-29 Earnings, Exhibits
8-K 2018-09-05 Regulation FD, Exhibits
8-K 2018-08-31 Other Events, Exhibits
8-K 2018-08-09 Officers, Exhibits
8-K 2018-07-31 Regulation FD, Exhibits
8-K 2018-07-26 Earnings, Exhibits
8-K 2018-07-06 M&A, Control, Officers, Other Events, Exhibits
8-K 2018-06-06 Other Events, Exhibits
8-K 2018-05-29 Shareholder Vote, Regulation FD, Other Events, Exhibits
8-K 2018-05-22 Shareholder Vote
8-K 2018-04-26 Earnings, Other Events, Exhibits
8-K 2018-04-03 Accountant, Exhibits
8-K 2018-02-27 Other Events, Exhibits
8-K 2018-01-31 Other Events, Exhibits
8-K 2018-01-30 Earnings, Other Events, Exhibits
ANSS Ansys 15,990
PBF PBF Energy 3,600
DORM Dorman Products 2,800
TGP Teekay Lng Partners 1,120
WOW Wideopenwest 706
CBB Cincinnati Bell 392
XNET Xunlei 227
WEBK Wellesley Bancorp 88
IGC India Globalization Capital 51
VICL Vical 26
TCBK 2019-03-31
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Note 1 -Summary of Significant Accounting Policies
Note 2-Business Combinations
Note 3-Investment Securities
Note 4 - Loans
Note 5 - Allowance for Loan Losses
Note 6 - Leases
Note 7 - Deposits
Note 8 - Commitments and Contingencies
Note 9 - Shareholders' Equity
Note 10 - Stock Options and Other Equity-Based Incentive Instruments
Note 11 - Noninterest Income and Expense
Note 12 - Earnings per Share
Note 13 - Comprehensive Income
Note 14 - Fair Value Measurement
Note 15 - Regulatory Matters
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
Item 6 - Exhibits
EX-31.1 d723347dex311.htm
EX-31.2 d723347dex312.htm
EX-32.1 d723347dex321.htm
EX-32.2 d723347dex322.htm

Trico Bancshares Earnings 2019-03-31

TCBK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d723347d10q.htm 10-Q 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended: March 31, 2019

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from                  to                 .

Commission File Number: 000-10661

 

 

TriCo Bancshares

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

CALIFORNIA   94-2792841

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

63 Constitution Drive

Chico, California 95973

(Address of Principal Executive Offices)(Zip Code)

(530) 898-0300

(Registrant’s Telephone Number, Including Area Code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “accelerated filer”, “large accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

    Large accelerated filer       Accelerated filer
    Non-accelerated filer       Smaller reporting company
          Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes     ☒  No

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock   TCBK   NASDAQ Global Select

Indicate the number of shares outstanding for each of the issuer’s classes of common stock, as of the latest practical date:

Common stock, no par value: 30,451,030 shares outstanding as of May 6, 2019

 

 

 


Table of Contents

TriCo Bancshares

FORM 10-Q

TABLE OF CONTENTS

 

          Page  

PART I – FINANCIAL INFORMATION

     2  
   Item 1 – Financial Statements (Unaudited)      2  
   Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations      36  
   Item 3 – Quantitative and Qualitative Disclosures about Market Risk      50  
   Item 4 – Controls and Procedures      50  

PART II – OTHER INFORMATION

     50  
   Item 1 – Legal Proceedings      50  
   Item 1A – Risk Factors      50  
   Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds      50  
   Item 6 – Exhibits      51  
   Signatures      52  
   Exhibits      53  

 

1


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

TRICO BANCSHARES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data; unaudited)

 

     At March 31,     At December 31,  
   2019     2018  

Assets:

    

Cash and due from banks

   $ 105,103     $ 119,781  

Cash at Federal Reserve and other banks

     213,605       107,752  
  

 

 

   

 

 

 

Cash and cash equivalents

     318,708       227,533  

Investment securities:

    

Marketable equity securities

     2,910       2,874  

Available for sale debt securities

     1,113,516       1,115,036  

Held to maturity debt securities

     431,016       444,936  

Restricted equity securities

     17,250       17,250  

Loans held for sale

     5,410       3,687  

Loans

     4,034,331       4,022,014  

Allowance for loan losses

     (32,064     (32,582
  

 

 

   

 

 

 

Total loans, net

     4,002,267       3,989,432  

Premises and equipment, net

     89,275       89,347  

Cash value of life insurance

     117,841       117,318  

Accrued interest receivable

     20,431       19,412  

Goodwill

     220,972       220,972  

Other intangible assets, net

     27,849       29,280  

Operating leases, right-of-use

     30,942       —    

Other assets

     73,465       75,364  
  

 

 

   

 

 

 

Total assets

   $ 6,471,852     $ 6,352,441  
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity:

    

Liabilities:

    

Deposits:

    

Noninterest-bearing demand

   $ 1,761,559     $ 1,760,580  

Interest-bearing

     3,668,703       3,605,886  
  

 

 

   

 

 

 

Total deposits

     5,430,262       5,366,466  

Accrued interest payable

     2,195       1,997  

Operating lease liability

     30,204       —    

Other liabilities

     86,362       83,724  

Other borrowings

     12,466       15,839  

Junior subordinated debt

     57,085       57,042  
  

 

 

   

 

 

 

Total liabilities

     5,618,574       5,525,068  
  

 

 

   

 

 

 

Commitments and contingencies (Note 8)

    

Shareholders’ equity:

    

Preferred stock, no par value: 1,000,000 shares authorized, zero issued and outstanding at March 31, 2019 and December 31, 2018

     —         —    

Common stock, no par value: 50,000,000 shares authorized; 30,432,419 and 30,417,223 issued and outstanding at March 31, 2019 and December 31, 2018, respectively

     542,340       541,762  

Retained earnings

     319,865       303,490  

Accumulated other comprehensive loss, net of tax

     (8,927     (17,879
  

 

 

   

 

 

 

Total shareholders’ equity

     853,278       827,373  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 6,471,852     $ 6,352,441  
  

 

 

   

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

2


Table of Contents

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data; unaudited)

 

     Three months ended  
   March 31,  
     2019     2018  

Interest and dividend income:

    

Loans, including fees

   $ 54,398     $ 38,049  

Investments:

    

Taxable securities

     10,555       7,322  

Tax exempt securities

     1,073       1,041  

Dividends

     360       336  

Interest bearing cash at Federal Reserve and other banks

     1,071       373  
  

 

 

   

 

 

 

Total interest and dividend income

     67,457       47,121  
  

 

 

   

 

 

 

Interest expense:

    

Deposits

     2,719       1,096  

Other borrowings

     13       342  

Junior subordinated debt

     855       697  
  

 

 

   

 

 

 

Total interest expense

     3,587       2,135  
  

 

 

   

 

 

 

Net interest income

     63,870       44,986  

Benefit from reversal of provision for loan losses

     (1,600     (236
  

 

 

   

 

 

 

Net interest income after benefit from reversal of provision for loan losses

     65,470       45,222  
  

 

 

   

 

 

 

Noninterest income:

    

Service charges and fees

     9,070       9,356  

Gain on sale of loans

     412       626  

Asset management and commission income

     642       876  

Increase in cash value of life insurance

     775       608  

Other

     965       824  
  

 

 

   

 

 

 

Total noninterest income

     11,864       12,290  
  

 

 

   

 

 

 

Noninterest expense:

    

Salaries and related benefits

     25,128       21,652  

Other

     20,385       16,510  
  

 

 

   

 

 

 

Total noninterest expense

     45,513       38,162  
  

 

 

   

 

 

 

Income before provision for income taxes

     31,821       19,350  

Provision for income taxes

     9,095       5,440  
  

 

 

   

 

 

 

Net income

   $ 22,726     $ 13,910  
  

 

 

   

 

 

 

Earnings per share:

    

Basic

   $ 0.75     $ 0.61  

Diluted

   $ 0.74     $ 0.60  

See accompanying notes to unaudited condensed consolidated financial statements.

 

3


Table of Contents

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands; unaudited)

 

     Three months ended  
     March 31,  
     2019      2018  

Net income

   $ 22,726      $ 13,910  

Other comprehensive income (loss), net of tax:

     

Unrealized gains (losses) on available for sale securities arising during the period

     8,952        (11,026

Change in minimum pension liability

     —          80  
  

 

 

    

 

 

 

Other comprehensive income (loss)

     8,952        (10,946
  

 

 

    

 

 

 

Comprehensive income

   $ 31,678      $ 2,964  
  

 

 

    

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except share and per share data; unaudited)

 

                       Accumulated        
     Shares of                 Other        
     Common     Common     Retained     Comprehensive        
     Stock     Stock     Earnings     Income (Loss)     Total  

Balance at January 1, 2018

     22,955,963     $ 255,836     $ 255,200     $ (5,228   $ 505,808  

Net income

         13,910         13,910  

Adoption ASU 2016-01

         (62     62       —    

Adoption ASU 2018-02

         1,093       (1,093     —    

Other comprehensive loss

           (10,946     (10,946

Stock option vesting

       37           37  

RSU vesting

       238           238  

PSU vesting

       116           116  

RSUs released

     494             —    

Repurchase of common stock

     (134     (1     (3       (4

Dividends paid ($ 0.17 per share)

         (3,903       (3,903
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2018

     22,956,323     $ 256,226     $ 266,235     $ (17,205   $ 505,256  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2019

     30,417,223     $ 541,762     $ 303,490     $ (17,879   $ 827,373  

Net income

         22,726         22,726  

Other comprehensive income

           8,952       8,952  

Stock options exercised

     41,000       647           647  

RSU vesting

       278           278  

PSU vesting

       119           119  

RSUs released

     355          

Repurchase of common stock

     (26,159     (466     (569       (1,035

Dividends paid ($ 0.19 per share)

         (5,782       (5,782
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2019

     30,432,419     $ 542,340     $ 319,865     $ (8,927   $ 853,278  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


Table of Contents

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands; unaudited)

 

     For the three months ended March 31,  
     2019     2018  

Operating activities:

    

Net income

   $ 22,726     $ 13,910  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation of premises and equipment, and amortization

     1,838       1,613  

Amortization of intangible assets

     1,431       339  

Reversal of provision for loan losses

     (1,600     (236

Amortization of investment securities premium, net

     571       700  

Originations of loans for resale

     (18,119     (20,332

Proceeds from sale of loans originated for resale

     16,689       23,270  

Gain on sale of loans

     (412     (626

Change in market value of mortgage servicing rights

     645       (111

Provision for losses on foreclosed assets

     —         90  

Gain on transfer of loans to foreclosed assets

     (98     —    

Gain on sale of foreclosed assets

     (99     (371

Loss on disposal of fixed assets

     38       13  

Increase in cash value of life insurance

     (775     (608

Gain on life insurance death benefit

     (32     —    

(Gain) loss on marketable equity securities

     (36     48  

Equity compensation vesting expense

     397       391  

Change in:

    

Interest receivable

     (1,019     1,365  

Interest payable

     198       28  

Other assets and liabilities, net

     (288     4,231  
  

 

 

   

 

 

 

Net cash from operating activities

     22,055       23,714  
  

 

 

   

 

 

 

Investing activities:

    

Proceeds from maturities of securities available for sale

     15,133       15,643  

Proceeds from maturities of securities held to maturity

     13,684       18,535  

Purchases of securities available for sale

     (1,238     (39,647

Loan origination and principal collections, net

     (11,351     (54,682

Proceeds from sale of other real estate owned

     278       1,943  

Proceeds from sale of premises and equipment

     11       —    

Purchases of premises and equipment

     (1,650     (2,200
  

 

 

   

 

 

 

Net cash from investing activities

     14,867       (60,408
  

 

 

   

 

 

 

Financing activities:

    

Net increase in deposits

     63,796       75,273  

Net change in other borrowings

     (3,373     (57,125

Repurchase of common stock, net

     (388     —    

Dividends paid

     (5,782     (3,903
  

 

 

   

 

 

 

Net cash used by financing activities

     54,253       14,245  
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     91,175       (22,449
  

 

 

   

 

 

 

Cash and cash equivalents and beginning of year

     227,533       205,428  
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ 318,708     $ 182,979  
  

 

 

   

 

 

 

Supplemental disclosure of noncash activities:

    

Unrealized gain (loss) on securities available for sale

   $ 12,710     $ (15,628

Loans transferred to foreclosed assets

     116       —    

Market value of shares tendered in-lieu of cash to pay for exercise of options and/or related taxes

     647       4  

Supplemental disclosure of cash flow activity:

    

Cash paid for interest expense

     3,389       2,107  

Cash paid for income taxes

     —         —    

See accompanying notes to unaudited condensed consolidated financial statements.

 

5


Table of Contents

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 –Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

TriCo Bancshares (the “Company” or “we”) is a California corporation organized to act as a bank holding company for Tri Counties Bank (the “Bank”). The Company and the Bank are headquartered in Chico, California. The Bank is a California-chartered bank that is engaged in the general commercial banking business in 29 California counties. The Company has five capital subsidiary business trusts (collectively, the “Capital Trusts”) that issued trust preferred securities, including two organized by the Company and three acquired with the acquisition of North Valley Bancorp.

The consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States of America and general practices in the banking industry. All adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. The financial statements include the accounts of the Company. All inter-company accounts and transactions have been eliminated in consolidation. For financial reporting purposes, the Company’s investments in the Capital Trusts of $1,714,000 are accounted for under the equity method and, accordingly, are not consolidated and are included in other assets on the consolidated balance sheet. The subordinated debentures issued and guaranteed by the Company and held by the Capital Trusts are reflected as debt on the Company’s consolidated balance sheet.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”). The Company believes that the disclosures made are adequate to make the information not misleading.

Segment and Significant Group Concentration of Credit Risk

The Company grants agribusiness, commercial, consumer, and residential loans to customers located throughout northern and central California. The Company has a diversified loan portfolio within the business segments located in this geographical area. The Company currently classifies all its operation into one business segment that it denotes as community banking.

Geographical Descriptions

For the purpose of describing the geographical location of the Company’s operations, the Company has defined northern California as that area of California north of, and including, Stockton to the east and San Jose to the west; central California as that area of the state south of Stockton and San Jose, to and including, Bakersfield to the east and San Luis Obispo to the west; and southern California as that area of the state south of Bakersfield and San Luis Obispo.

Cash and Cash Equivalents

Net cash flows are reported for loan and deposit transactions and other borrowings. For purposes of the consolidated statement of cash flows, cash, due from banks with original maturities less than 90 days, interest-earning deposits in other banks, and Federal funds sold are considered to be cash equivalents.

Accounting Standards Adopted in 2019

The Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02, which among other things, requires lessees to recognize most leases on-balance sheet, increasing reported assets and liabilities. Lessor accounting remains substantially similar to current U.S. GAAP. The FASB has issued incremental guidance to Topic 842 standard through ASU No. 2018-11, 2018-20, and 2019-01. The Company has elected to use the transition relief approach as provided in ASU 2018-11, which permits the Company to use January 1, 2019 as both the application date and the adoption date, rather than the modified retrospective approach which would have required an application date of January 1, 2017 and adoption date of January 1, 2019. The Company also elected certain relief options offered within the new standard, which include the package of practical expedients, the option not to recognize a right-of-use asset (ROUA) and lease liability that arise from short-term leases (i.e. leases with terms of 12 months or less), and the option of hindsight when determining lease term. Substantially all of the Company’s lease agreements are considered operating

 

6


Table of Contents

leases and were not previously recognized on the Company’s balance sheets. As of January 1, 2019, the Company recorded a ROUA and corresponding lease liability for all applicable operating leases. While the guidance increased the Company’s gross assets and liabilities, the adoption of ASU 2016-02 did not have a material impact on the consolidated statements of income or the consolidated statements of cash flows. See Note 6 for more information.

The FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Topic 310). ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium to require such premiums to be amortized to the earliest call date unless applicable guidance related to certain pools of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to amortize premiums on individual, non-pooled callable debt securities as a yield adjustment over the contractual life of the security. ASU 2017-08 does not change the accounting for callable debt securities held at a discount. ASU 2017-08 was effective for the Company on January 1, 2019, and did not have an impact on the Company’s consolidated financial statements.

Accounting Standards Pending Adoption

The FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326). ASU 2016-13 is the final guidance on the new current expected credit loss (‘‘CECL’’) model. ASU 2016-13, among other things, requires the incurred loss impairment methodology in current GAAP be replaced with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held to maturity (‘‘HTM’’) debt securities. ASU 2016-13 amends the accounting for credit losses on available-for-sale securities (‘‘AFS’’), whereby credit losses will be presented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for purchased loans with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Lastly, ASU 2016-13 requires enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as on the credit quality and underwriting standards of an organization’s portfolio. These disclosures require organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. ASU 2016-13 allows for a modified retrospective approach with a cumulative effect adjustment to the balance sheet upon adoption (charge to retained earnings instead of the income statement). ASU 2016-13 will be effective for the Company on January 1, 2020, and early adoption is permitted. While the Company is currently evaluating the provisions of ASU 2016-13 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements, it has taken steps to prepare for the implementation when it becomes effective, such as forming an internal task force, gathering pertinent data, consulting with outside professionals, and evaluating its current IT systems. While detailed modeling efforts are ongoing, the validation of expected credit loss estimates will likely not be available until late in 2019. Management expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the first reporting period in which the new standard is effective, but cannot yet estimate the magnitude of the one-time adjustment or the overall impact of the new guidance on the Company’s financial position, results of operations or cash flows.

FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350): ASU 2017-04 eliminates step two of the goodwill impairment test (the hypothetical purchase price allocation used to determine the implied fair value of goodwill) when step one (determining if the carrying value of a reporting unit exceeds its fair value) is failed. Instead, entities simply will compare the fair value of a reporting unit to its carrying amount and record goodwill impairment for the amount by which the reporting unit’s carrying amount exceeds its fair value. ASU 2017-04 will be effective for the Company on January 1, 2020 and is not expected to have a significant impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Entities are also allowed to elect early adoption the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date. As ASU No. 2018-13 only revises disclosure requirements, it will not have a significant impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” This ASU makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020; early adoption is permitted. As ASU 2018-14 only revises disclosure requirements, it will not have a significant impact on the Company’s consolidated financial statements.

 

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Note 2—Business Combinations

Merger with FNB Bancorp

On July 6, 2018, the Company completed the acquisition of FNB Bancorp (“FNBB”) for an aggregate transaction value of $291,132,000. FNBB was merged into the Company, and the Company issued 7,405,277 shares of common stock to the former shareholders of FNBB. FNBB’s subsidiary, First National Bank of Northern California, merged into the Bank on the same day. The Company also paid $6.7 million to settle and retire all FNBB stock options outstanding as of the acquisition date. Upon the consummation of the merger, the Company added 12 branches within San Mateo, San Francisco, and Santa Clara counties.

In accordance with accounting for business combinations, the Company recorded $156,661,000 of goodwill and $27,605,000 of core deposit intangibles on the acquisition date. The core deposit intangibles will be amortized over the weighted average remaining life of 6.2 years with no significant residual value. For tax purposes, purchase prices accounting adjustments including goodwill are all non-taxable and /or non-deductible. Acquisition related costs of $476,000 are included in the consolidated statements of income for the three months ended March 31, 2018. There have been no acquisition costs incurred during the three months ended March 31, 2019.

The acquisition was consistent with the Company’s strategy to expand into the Bay Area market. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded region. Goodwill arising from the acquisition consisted largely of the estimated cost savings resulting from the combined operations.

The following table summarizes the consideration paid for FNBB and the amounts of assets acquired and liabilities assumed that were recorded at the acquisition date (in thousands).

 

     FNB Bancorp
July 6, 2018
 

Fair value of consideration transferred:

  

Fair value of shares issued

   $ 284,437  

Cash consideration

     6,695  
  

 

 

 

Total fair value of consideration transferred

     291,132  
  

 

 

 

Assets acquired:

  

Cash and cash equivalents

     37,308  

Securities available for sale

     335,667  

Restricted equity securities

     7,723  

Loans

     834,683  

Premises and equipment

     30,522  

Cash value of life insurance

     16,817  

Core deposit intangible

     27,605  

Other assets

     16,214  
  

 

 

 

Total assets acquired

     1,306,539  
  

 

 

 

Liabilities assumed:

  

Deposits

     991,935  

Other liabilities

     15,133  

Short-term borrowings—Federal Home Loan Bank

     165,000  
  

 

 

 

Total liabilities assumed

     1,172,068  
  

 

 

 

Total net assets acquired

     134,471  
  

 

 

 

Goodwill recognized

   $ 156,661  
  

 

 

 

 

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Table of Contents

A summary of the estimated fair value adjustments resulting in the goodwill recorded in the FNB Bancorp acquisition are presented below (in thousands):

 

     FNB Bancorp
July 6, 2018
 

Value of stock consideration paid to FNB Bancorp Shareholders

   $ 284,437  

Cash consideration

     6,695  

Less:

  

Cost basis net assets acquired

     114,030  

Fair value adjustments:

  

Investments

     (1,081

Loans

     (22,390

Premises and Equipment

     21,590  

Core deposit intangible

     27,327  

Deferred income taxes

     (6,394

Other

     1,389  
  

 

 

 

Goodwill

   $ 156,661  
  

 

 

 

The fair value of net assets acquired includes fair value adjustments to certain loans that were not considered impaired (PNCI loans) as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. As such, these loans were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans (PCI loans), which have shown evidence of credit deterioration since origination. The gross contractual amounts receivable and fair value for PNCI loans as of the acquisition date was $866,189,000 and $833,381,000, respectively. The gross contractual amounts receivable and fair value for PCI loans as of the acquisition date was $1,683,000 and $1,302,000, respectively. At the acquisition date, the Company was unable to estimate the expected contractual cash flows to be collected from the purchased credit impaired loans.

 

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Note 3—Investment Securities

The amortized cost and estimated fair values of investments in debt securities are summarized in the following tables:

 

     March 31, 2019  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 
     (in thousands)  

Debt Securities Available for Sale

           

Obligations of U.S. government agencies

   $ 631,914      $ 1,862      $ (6,676    $ 627,100  

Obligations of states and political subdivisions

     128,706        1,242        (599      129,349  

Corporate bonds

     4,394        84        —          4,478  

Asset backed securities

     356,766        141        (4,318      352,589  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities available for sale

   $ 1,121,780      $ 3,329      $ (11,593    $ 1,113,516  
  

 

 

    

 

 

    

 

 

    

 

 

 

Debt Securities Held to Maturity

           

Obligations of U.S. government agencies

   $ 416,418      $ 2,190      $ (2,581    $ 416,027  

Obligations of states and political subdivisions

     14,598        173        (25      14,746  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities held to maturity

   $ 431,016      $ 2,363      $ (2,606    $ 430,773  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2018  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 
     (in thousands)  

Debt Securities Available for Sale

  

Obligations of U.S. government agencies

   $ 647,288      $ 771      $ (18,078    $ 629,981  

Obligations of states and political subdivisions

     128,890        294        (3,112      126,072  

Corporate bonds

     4,381        97        —          4,478  

Asset backed securities

     355,451        73        (1,019      354,505  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities available for sale

   $ 1,136,010      $ 1,235      $ (22,209    $ 1,115,036  
  

 

 

    

 

 

    

 

 

    

 

 

 

Debt Securities Held to Maturity

           

Obligations of U.S. government agencies

   $ 430,343      $ 327      $ (7,745    $ 422,925  

Obligations of states and political subdivisions

     14,593        82        (230      14,445  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities held to maturity

   $ 444,936      $ 409      $ (7,975    $ 437,370  
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no sales of investment securities during the three months ended March 31, 2019 and 2018. Investment securities with an aggregate carrying value of $587,233,000 and $597,591,000 at March 31, 2019 and December 31, 2018, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

 

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The amortized cost and estimated fair value of debt securities at March 31, 2019 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At March 31, 2019, obligations of U.S. government corporations and agencies with a cost basis totaling $1,048,332,000 consist almost entirely of residential real estate mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages. For purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies is categorized based on final maturity date. At March 31, 2019, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S. government corporations and agencies to be approximately 5.5 years. Average remaining life is defined as the time span after which the principal balance has been reduced by half.

 

Debt Securities

   Available for Sale      Held to Maturity  
(In thousands)    Amortized
Cost
     Estimated
Fair Value
     Amortized
Cost
     Estimated
Fair Value
 

Due in one year

   $ 2,413      $ 2,418      $ —        $ —    

Due after one year through five years

     10,584        10,798        1,246        1,260  

Due after five years through ten years

     18,130        18,624        23,944        23,899  

Due after ten years

     1,090,653        1,081,676        405,826        405,614  
  

 

 

    

 

 

    

 

 

    

 

 

 

Totals

   $ 1,121,780      $ 1,113,516      $ 431,016      $ 430,773  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

 

     Less than 12 months     12 months or more     Total  
     Fair
Value
     Unrealized
Loss
    Fair
Value
     Unrealized
Loss
    Fair
Value
     Unrealized
Loss
 
March 31, 2019    (in thousands)  

Debt Securities Available for Sale

               

Obligations of U.S. government agencies

   $ 481      $ (2   $ 496,424      $ (6,674   $ 496,905      $ (6,676

Obligations of states and political subdivisions

     24,644        (598     566        (1     25,210        (599

Asset backed securities

     330,078        (4,318     —          —         330,078        (4,318
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities available for sale

   $ 355,203      $ (4,918   $ 496,990      $ (6,675   $ 852,193      $ (11,593
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
Debt Securities Held to Maturity                                        

Obligations of U.S. government agencies

   $ —        $ —       $ 224,551      $ (2,581   $ 224,551      $ (2,581

Obligations of states and political subdivisions

     —          —         5,891        (25     5,891        (25
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities held to maturity

   $ —        $ —       $ 230,442      $ (2,606   $ 230,442      $ (2,606
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
               

 

     Less than 12 months     12 months or more     Total  
     Fair
Value
     Unrealized
Loss
    Fair
Value
     Unrealized
Loss
    Fair
Value
     Unrealized
Loss
 
December 31, 2018    (in thousands)  

Debt Securities Available for Sale

               

Obligations of U.S. government agencies

   $ 171,309      $ (3,588   $ 394,630      $ (14,490   $ 565,939      $ (18,078

Obligations of states and political subdivisions

     63,738        (1,541     20,719        (1,571     84,457        (3,112

Asset backed securities

     101,386        (1,019     —          —         101,386        (1,019
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities available for sale

   $ 336,433      $ (6,148   $ 415,349      $ (16,061   $ 751,782      $ (22,209

Debt Securities Held to Maturity

               

Obligations of U.S. government agencies

   $ 223,810      $ (2,619   $ 158,648      $ (5,126   $ 382,458      $ (7,745

Obligations of states and political subdivisions

     5,786        (114     4,042        (116     9,828        (230
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities held to maturity

   $ 229,596      $ (2,733 )   $ 162,690    $ (5,242 )   $ 392,286    $ (7,975
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Obligations of U.S. government agencies: Unrealized losses on investments in obligations of U.S. government agencies are caused by interest rate increases. The contractual cash flows of these securities are guaranteed by U.S. Government Sponsored Entities (principally Fannie Mae and Freddie Mac). It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At March 31, 2019, 93 debt securities representing obligations of U.S. government agencies had unrealized losses with aggregate depreciation of (1.3%) from the Company’s amortized cost basis.

 

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Table of Contents

Obligations of states and political subdivisions: The unrealized losses on investments in obligations of states and political subdivisions were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At March 31, 2019, 33 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of (2.0%) from the Company’s amortized cost basis.

Asset backed securities: The unrealized losses on investments in asset backed securities were caused by increases in required yields by investors in these types of securities. At the time of purchase, each of these securities was rated AA or AAA and through March 31, 2019 has not experienced any deterioration in credit rating. The Company continues to monitor these securities for changes in credit rating or other indications of credit deterioration. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At March 31, 2019, 28 asset backed securities had unrealized losses with aggregate depreciation of (1.3%) from the Company’s amortized cost basis.

Marketable equity securities: All unrealized losses recognized during the reporting period were for equity securities still held at March 31, 2019.

Note 4 – Loans

A summary of loan balances follows (in thousands):

 

     March 31, 2019  
     Originated      PNCI      PCI      Total  

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 357,559      $ 163,268      $ 1,585      $ 522,412  

Commercial

     1,929,508        671,397        6,022        2,606,927  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loan on real estate

     2,287,067        834,665        7,607        3,129,339  

Consumer:

           

Home equity lines of credit

     279,075        38,090        1,088        318,253  

Home equity loans

     31,245        3,356        436        35,037  

Other

     45,020        20,001        41        65,062  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     355,340        61,447        1,565        418,352  

Commercial

     227,314        39,295        2,554        269,163  

Construction:

           

Residential

     115,688        30,096        —          145,784  

Commercial

     64,576        7,117        —          71,693  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     180,264        37,213        —          217,477  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans, net of deferred loan fees and discounts

   $ 3,049,985      $ 972,620      $ 11,726      $ 4,034,331  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total principal balance of loans owed, net of charge-offs

   $ 3,059,398      $ 1,007,678      $ 18,376      $ 4,085,452  

Unamortized net deferred loan fees

     (9,413      —          —          (9,413

Discounts to principal balance of loans owed, net of charge-offs

     —          (35,058      (6,650      (41,708
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans, net of unamortized deferred loan fees and discounts

   $ 3,049,985      $ 972,620      $ 11,726      $ 4,034,331  
  

 

 

    

 

 

    

 

 

    

 

 

 

Allowance for loan losses

   $ (31,088    $ (969    $ (7    $ (32,064
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     December 31, 2018  
     Originated      PNCI      PCI      Total  

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 343,796      $ 169,792      $ 1,674      $ 515,262  

Commercial

     1,910,981        708,401        8,456        2,627,838  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loan on real estate

     2,254,777        878,193        10,130        3,143,100  

Consumer:

           

Home equity lines of credit

     284,453        40,957        1,167        326,577  

Home equity loans

     32,660        3,585        439        36,684  

Other

     34,020        21,659        42        55,721  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     351,133        66,201        1,648        418,982  

Commercial

     228,635        45,468        2,445        276,548  

Construction:

           

Residential

     90,703        30,593        —          121,296  

Commercial

     56,208        5,880        —          62,088  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     146,911        36,473        —          183,384  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans, net of deferred loan fees and discounts

   $ 2,981,456      $ 1,026,335      $ 14,223      $ 4,022,014  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total principal balance of loans owed, net of charge-offs

   $ 2,991,324      $ 1,062,655      $ 21,265      $ 4,075,244  

Unamortized net deferred loan fees

     (9,868      —          —          (9,868

Discounts to principal balance of loans owed, net of charge-offs

     —          (36,320      (7,042      (43,362
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans, net of unamortized deferred loan fees and discounts

   $ 2,981,456      $ 1,026,335      $ 14,223      $ 4,022,014  
  

 

 

    

 

 

    

 

 

    

 

 

 

Allowance for loan losses

   $ (31,793    $ (667    $ (122    $ (32,582
  

 

 

    

 

 

    

 

 

    

 

 

 

The following is a summary of the change in accretable yield for PCI during the periods indicated (in thousands):

 

     Three months ended March 31,  
     2019      2018  

Change in accretable yield:

     

Balance at beginning of period

   $ 6,059      $ 6,137  

Accretion to interest income

     (301      (255

Reclassification (to) from nonaccretable difference

     (11      140  
  

 

 

    

 

 

 

Balance at end of period

   $ 5,747      $ 6,022  
  

 

 

    

 

 

 

 

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Table of Contents

Note 5 – Allowance for Loan Losses

The following tables summarize the activity in the allowance for loan losses, and ending balance of loans, net of unearned fees for the periods indicated.

 

     Allowance for Loan Losses – Three Months Ended March 31, 2019  
(in thousands)    Beginning
Balance
     Charge-offs     Recoveries      Provision
(benefit)
    Ending Balance  

Mortgage loans on real estate:

            

Residential 1-4 family

   $ 2,676      $ —       $ 2      $ (178   $ 2,500  

Commercial

     12,944        —         1,381        (1,995     12,330  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total mortgage loans on real estate

     15,620        —         1,383        (2,173     14,830  

Consumer:

            

Home equity lines of credit

     6,042        —         95        (122     6,015  

Home equity loans

     1,540        —         87        (341     1,286  

Other

     793        (207     75        379       1,040  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total consumer loans

     8,375        (207     257        (84     8,341  

Commercial

     6,090        (519     168        339       6,078  

Construction:

            

Residential

     1,834        —         —          574       2,408  

Commercial

     663        —         —          (256     407  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total construction

     2,497        —         —          318       2,815  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $  32,582      $  (726   $  1,808      $  (1,600   $  32,064  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

     Allowance for Loan Losses – As of March 31, 2019  
(in thousands)    Loans pooled
for evaluation
     Individually
evaluated for
impairment
     Loans acquired
with deteriorated
credit quality
     Total
allowance
for loan losses
 

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 2,445      $ 55      $  —        $ 2,500  

Commercial

     12,293        36        1        12,330  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     14,738        91        1        14,830  

Consumer:

           

Home equity lines of credit

     5,879        130        6        6,015  

Home equity loans

     1,216        70        —          1,286  

Other

     1,023        17        —          1,040  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     8,118        217        6        8,341  

Commercial

     4,636        1,442        —          6,078  

Construction:

           

Residential

     2,408        —          —          2,408  

Commercial

     407        —          —          407  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     2,815        —          —          2,815  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  30,307      $  1,750      $ 7      $  32,064  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Loans, Net of Unearned fees – As of March 31, 2019  
(in thousands)    Loans pooled
for evaluation
     Individually
evaluated for
impairment
     Loans acquired
with deteriorated
credit quality
     Total loans, net
of unearned fees
 

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 517,038      $ 3,789      $ 1,585      $ 522,412  

Commercial

     2,592,994        7,911        6,022        2,606,927  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     3,110,032        11,700        7,607        3,129,339  

Consumer:

           

Home equity lines of credit

     314,609        2,556        1,088        318,253  

Home equity loans

     32,618        1,983        436        35,037  

Other

     64,891        130        41        65,062  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     412,118        4,669        1,565        418,352  

Commercial

     261,933        4,676        2,554        269,163  

Construction:

           

Residential

     145,784        —          —          145,784  

Commercial

     71,693        —          —          71,693  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     217,477        —          —          217,477  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  4,001,560      $  21,045      $  11,726      $  4,034,331  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

14


Table of Contents
     Allowance for Loan Losses – Year Ended December 31, 2018  
(in thousands)    Beginning
Balance
     Charge-offs     Recoveries      Provision
(benefit)
    Ending Balance  

Mortgage loans on real estate:

            

Residential 1-4 family

   $ 2,317      $ (77   $ —        $ 436     $ 2,676  

Commercial

     11,441        (15     68        1,450       12,944  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total mortgage loans on real estate

     13,758        (92     68        1,886       15,620  

Consumer:

            

Home equity lines of credit

     5,800        (277     846        (327     6,042  

Home equity loans

     1,841        (24     297        (574     1,540  

Other

     586        (783     288        702       793  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total consumer loans

     8,227        (1,084     1,431        (199     8,375  

Commercial

     6,512        (1,188     541        225       6,090  

Construction:

            

Residential

     1,184        —         —          650       1,834  

Commercial

     642        —         —          21       663  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total construction

     1,826        —         —          671       2,497  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $  30,323      $  (2,364   $  2,040      $  2,583     $  32,582  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

     Allowance for Loan Losses – As of December 31, 2018  
(in thousands)    Loans pooled
for evaluation
     Individually
evaluated for
impairment
     Loans acquired
with deteriorated
credit quality
     Total allowance
for loan losses
 

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 2,620      $ 56      $  —        $ 2,676  

Commercial

     12,737        91        116        12,944  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     15,357        147        116        15,620  

Consumer:

           

Home equity lines of credit

     5,838        198        6        6,042  

Home equity loans

     1,486        54        —          1,540  

Other

     779        14        —          793  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     8,103        266        6        8,375  

Commercial

     4,309        1,781        —          6,090  

Construction:

           

Residential

     1,834        —          —          1,834  

Commercial

     663        —          —          663  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     2,497        —          —          2,497  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  30,266      $  2,194      $ 122      $  32,582  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Loans, Net of Unearned fees – As of December 31, 2018  
(in thousands)    Loans pooled
for evaluation
     Individually
evaluated for
impairment
     Loans acquired
with deteriorated
credit quality
     Total loans, net
of unearned fees
 

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 509,267      $ 4,321      $ 1,674      $ 515,262  

Commercial

     2,606,819        12,563        8,456        2,627,838  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     3,116,086        16,884        10,130        3,143,100  

Consumer:

           

Home equity lines of credit

     322,764        2,646        1,167        326,577  

Home equity loans

     33,142        3,103        439        36,684  

Other

     55,483        196        42        55,721  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     411,389        5,945        1,648        418,982  

Commercial

     268,885        5,218        2,445        276,548  

Construction:

           

Residential

     121,296        —          —          121,296  

Commercial

     62,088        —          —          62,088  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     183,384        —          —          183,384  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  3,979,744      $  28,047      $  14,223      $  4,022,014  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

15


Table of Contents
     Allowance for Loan Losses – Three Months Ended March 31, 2018  
(in thousands)    Beginning
Balance
     Charge-offs     Recoveries      Provision
(benefit)
    Ending Balance  

Mortgage loans on real estate:

            

Residential 1-4 family

   $ 2,317      $ (1   $  —        $  (146   $ 2,170  

Commercial

     11,441        —         15        39       11,495  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total mortgage loans on real estate

     13,758        (1     15        (107     13,665  

Consumer:

            

Home equity lines of credit

     5,800        (80     209        (517     5,412  

Home equity loans

     1,841        —         14        (119     1,736  

Other

     586        (194     78        100       570  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total consumer loans

     8,227        (274     301        (536     7,718  

Commercial

     6,512        (205     50        35       6,392  

Construction:

            

Residential

     1,184        —         —          167       1,351  

Commercial

     642        —         —          205       847  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total construction

     1,826        —         —          372       2,198  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $  30,323      $  (480   $ 366      $  (236   $  29,973  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

     Allowance for Loan Losses – As of March 31, 2018  
(in thousands)    Loans pooled
for evaluation
     Individually
evaluated for
impairment
     Loans acquired
with deteriorated
credit quality
     Total allowance
for loan losses
 

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 1,910      $ 190      $ 70      $ 2,170  

Commercial

     11,281        154        60        11,495  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     13,191        344        130        13,665  

Consumer:

           

Home equity lines of credit

     4,956        448        8        5,412  

Home equity loans

     1,606        130        —          1,736  

Other

     514        56        —          570  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     7,076        634        8        7,718  

Commercial

     4,249        2,113        30        6,392  

Construction:

           

Residential

     1,351        —          —          1,351  

Commercial

     847        —          —          847  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     2,198        —          —          2,198  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  26,714      $  3,091      $  168      $  29,973  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Loans, Net of Unearned fees – As of March 31, 2018  
(in thousands)    Loans pooled
for evaluation
     Individually
evaluated for
impairment
     Loans acquired
with deteriorated
credit quality
     Total loans, net
of unearned fees
 

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 378,832      $ 5,535      $ 1,744      $ 386,111  

Commercial

     1,954,120        11,110        8,038        1,973,268  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     2,332,952        16,645        9,782        2,359,379  

Consumer:

           

Home equity lines of credit

     279,140        2,450        1,661        283,251  

Home equity loans

     39,774        1,673        485        41,932  

Other

     23,285        278        43        23,606  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     342,199        4,401        2,189        348,789  

Commercial

     208,889        4,621        2,505        216,015  

Construction:

           

Residential

     71,462        136        —          71,598  

Commercial

     73,952        —          —          73,952  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     145,414        136        —          145,550  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  3,029,454      $  25,803      $  14,476      $  3,069,733  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

16


Table of Contents

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs, (iii) non-performing loans, and (iv) delinquency within the portfolio.

The Company utilizes a risk grading system to assign a risk grade to each of its loans. Loans are graded on a scale ranging from Pass to Loss. A description of the general characteristics of the risk grades is as follows:

 

 

Pass – This grade represents loans ranging from acceptable to very little or no credit risk. These loans typically meet most if not all policy standards in regard to: loan amount as a percentage of collateral value, debt service coverage, profitability, leverage, and working capital.

 

 

Special Mention – This grade represents “Other Assets Especially Mentioned” in accordance with regulatory guidelines and includes loans that display some potential weaknesses which, if left unaddressed, may result in deterioration of the repayment prospects for the asset or may inadequately protect the Company’s position in the future. These loans warrant more than normal supervision and attention.

 

 

Substandard – This grade represents “Substandard” loans in accordance with regulatory guidelines. Loans within this rating typically exhibit weaknesses that are well defined to the point that repayment is jeopardized. Loss potential is, however, not necessarily evident. The underlying collateral supporting the credit appears to have sufficient value to protect the Company from loss of principal and accrued interest, or the loan has been written down to the point where this is true. There is a definite need for a well-defined workout/rehabilitation program.

 

 

Doubtful – This grade represents “Doubtful” loans in accordance with regulatory guidelines. An asset classified as Doubtful has all the weaknesses inherent in a loan classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and financing plans.

 

 

Loss – This grade represents “Loss” loans in accordance with regulatory guidelines. A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan, even though some recovery may be affected in the future. The portion of the loan that is graded loss should be charged off no later than the end of the quarter in which the loss is identified.

The following tables present ending loan balances by loan category and risk grade for the periods indicated:

 

     Credit Quality Indicators Originated Loans– As of March 31, 2019  
(in thousands)    Pass      Special
Mention
     Substandard      Doubtful
/ Loss
     Total Originated
Loans
 

Mortgage loans on real estate:

              

Residential 1-4 family

   $ 350,256      $ 1,807      $ 5,496      $  —        $ 357,559  

Commercial

     1,886,958        33,094        9,456        —          1,929,508  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     2,237,214        34,901        14,952        —          2,287,067  

Consumer:

              

Home equity lines of credit

     273,144        2,867        3,064        —          279,075  

Home equity loans

     27,328        1,533        2,384        —          31,245  

Other

     44,611        309        100        —          45,020  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     345,083        4,709        5,548        —          355,340  

Commercial

     214,758        7,896        4,660        —          227,314  

Construction:

              

Residential

     115,432        —          256        —          115,688  

Commercial

     64,238        338        —          —          64,576  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     179,670        338        256        —          180,264  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $  2,976,725      $  47,844      $  25,416      $ —        $  3,049,985  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

17


Table of Contents
     Credit Quality Indicators PNCI Loans – As of March 31, 2019  
(in thousands)    Pass      Special
Mention
     Substandard      Doubtful / Loss      Total PNCI
Loans
 

Mortgage loans on real estate:

              

Residential 1-4 family

   $  161,351      $  1,109      $ 808      $  —        $  163,268  

Commercial

     665,630        2,727        3,040        —          671,397  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     826,981        3,836        3,848        —          834,665  

Consumer:

              

Home equity lines of credit

     35,888        925        1,277        —          38,090  

Home equity loans

     3,174        98        84        —          3,356  

Other

     19,790        208        3        —          20,001  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     58,852        1,231        1,364        —          61,447  

Commercial

     38,762        201        332        —          39,295  

Construction:

              

Residential

     30,096        —          —          —          30,096  

Commercial

     6,872        —          245        —          7,117  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     36,968        —          245        —          37,213  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 961,563      $ 5,268      $  5,789      $ —        $ 972,620  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Credit Quality Indicators Originated Loans– As of December 31, 2018  
(in thousands)    Pass      Special
Mention
     Substandard      Doubtful / Loss      Total Originated
Loans
 

Mortgage loans on real estate:

              

Residential 1-4 family

   $ 337,189      $ 1,724      $ 4,883      $  —        $ 343,796  

Commercial

     1,861,627        33,483        15,871        —          1,910,981  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     2,198,816        35,207        20,754        —          2,254,777  

Consumer:

              

Home equity lines of credit

     279,491        2,309        2,653        —          284,453  

Home equity loans

     29,289        1,054        2,317        —          32,660  

Other

     33,606        341        73        —          34,020  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     342,386        3,704        5,043        —          351,133  

Commercial

     217,126        6,127        5,382        —          228,635  

Construction:

              

Residential

     90,412        32        259        —          90,703  

Commercial

     55,863        345        —          —          56,208  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     146,275        377        259        —          146,911  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $  2,904,603      $  45,415      $  31,438      $ —        $  2,981,456  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Credit Quality Indicators PNCI Loans – As of December 31, 2018  
(in thousands)    Pass      Special
Mention
     Substandard      Doubtful / Loss      Total PNCI
Loans
 

Mortgage loans on real estate:

              

Residential 1-4 family

   $ 167,908      $ 1,086      $ 798      $  —        $ 169,792  

Commercial

     701,868        3,085        3,448        —          708,401  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     869,776        4,171        4,246        —          878,193  

Consumer:

              

Home equity lines of credit

     38,780        1,124        1,053        —          40,957  

Home equity loans

     3,413        74        98        —          3,585  

Other

     21,481        173        5        —          21,659  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     63,674        1,371        1,156        —          66,201  

Commercial

     45,027        321        120        —          45,468  

Construction:

              

Residential

     30,593        —          —          —          30,593  

Commercial

     5,880        —          —          —          5,880  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     36,473        —          —          —          36,473  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  1,014,950      $  5,863      $  5,522      $ —        $  1,026,335  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Consumer loans, whether unsecured or secured by real estate, automobiles, or other personal property, are susceptible to three primary risks; non-payment due to income loss, over-extension of credit and, when the borrower is unable to pay, shortfall in collateral value. Typically, payment performance will follow general economic trends in the marketplace driven primarily by rises in the unemployment rate; non-payment is likely due to loss of employment. Loss of collateral value can be due to market demand shifts, damage to collateral itself or a combination of the two. Problem consumer loans are generally identified by payment history and current performance of the borrower (delinquency). The Bank manages its consumer loan portfolios by monitoring delinquency and contacting borrowers to encourage repayment, suggesting modifications if appropriate, and, when continued scheduled payments become unrealistic, initiating repossession or foreclosure through appropriate channels.

Commercial real estate loans generally fall into two categories, owner-occupied and non-owner occupied. Loans secured by owner occupied real estate are primarily susceptible to changes in the business conditions of the related business. This may be driven by, among other things, industry changes, geographic business changes, changes in the individual fortunes of the business owner, and general economic conditions and changes in business cycles. These same risks apply to commercial loans whether secured by equipment or other personal property or unsecured. Losses on loans secured by owner occupied real estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral. When default is driven by issues related specifically to the business owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying collateral generally has devalued more and results in larger losses due to default. Loans secured by non-owner occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates, rental rates or room rates. Most often these shifts are a result of changes in general economic or market conditions or overbuilding and resultant over-supply. Losses are dependent on value of underlying collateral at the time of default. Values are generally driven by these same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs.

Construction loans, whether owner occupied or non-owner occupied commercial real estate loans or residential development loans, are not only susceptible to the related risks described above but the added risks of construction itself including cost over-runs, mismanagement of the project, or lack of demand or market changes experienced at time of completion. Again, losses are primarily related to underlying collateral value and changes therein as described above.

Problem commercial loans are generally identified by periodic review of financial information which may include financial statements, tax returns, rent rolls and payment history of the borrower (delinquency). Based on this information the Bank may decide to take any of several courses of action including demand for repayment, additional collateral or guarantors, and, when repayment becomes unlikely through borrower’s income and cash flow, repossession or foreclosure of the underlying collateral.

Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations or revaluations are obtained at initiation of the credit and periodically, but not less than every twelve months depending on collateral type, once repayment is questionable and the loan has been classified.

Once a loan becomes delinquent and repayment becomes questionable, a Bank collection officer will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Bank will estimate its probable loss, using a recent valuation as appropriate to the underlying collateral less estimated costs of sale, and charge the loan down to the estimated net realizable amount. Depending on the length of time until ultimate collection, the Bank may revalue the underlying collateral and take additional charge-offs as warranted. Revaluations may occur as often as every 3-12 months depending on the underlying collateral and volatility of values. Final charge-offs or recoveries are taken when collateral is liquidated and actual loss is known. Unpaid balances on loans after or during collection and liquidation may also be pursued through lawsuit and attachment of wages or judgment liens on borrower’s other assets.

 

19


Table of Contents

The following table shows the ending balance of current and past due originated loans by loan category as of the date indicated:

 

     Analysis of Originated Past Due Loans - As of March 31, 2019         
(in thousands)    30-59 days      60-89 days      > 90 days      Total Past
Due Loans
     Current      Total      > 90 Days and
Still Accruing
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $  2,231      $  —        $ 396      $ 2,627      $ 354,932      $ 357,559      $  —    

Commercial

     767        —          901        1,668        1,927,840        1,929,508        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     2,998        —          1,297        4,295        2,282,772        2,287,067        —    

Consumer:

                    

Home equity lines of credit

     1,774        11        362        2,147        276,928        279,075        —    

Home equity loans

     512        24        163        699        30,546        31,245        17  

Other

     151        —          9        160        44,860        45,020        9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     2,437        35        534        3,006        352,334        355,340        26  

Commercial

     1,122        453        371        1,946        225,368        227,314        14  

Construction:

                    

Residential

     785        —          —          785        114,903        115,688        —    

Commercial

     —          —          —          —          64,576        64,576        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     785        —          —          785        179,479        180,264        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 7,342      $ 488      $  2,202      $  10,032      $  3,039,953      $  3,049,985      $ 40  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table shows the ending balance of current and past due PNCI loans by loan category as of the date indicated:

 

     Analysis of PNCI Past Due Loans - As of March 31, 2019         
(in thousands)    30-59 days      60-89 days      > 90 days      Total Past
Due Loans
     Current      Total      > 90 Days and
Still Accruing
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $  1,457      $  270      $ —        $  1,727      $  161,541      $  163,268      $  —    

Commercial

     2,898        —          949        3,847        667,550        671,397        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     4,355        270        949        5,574        829,091        834,665        —    

Consumer:

                    

Home equity lines of credit

     418        —          1        419        37,671        38,090        —    

Home equity loans

     14        —          —          14        3,342        3,356        —    

Other

     151        —          —          151        19,850        20,001        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     583        —          1        584        60,863        61,447        —    

Commercial

     2        99        233        334        38,961        39,295        —    

Construction:

                    

Residential

     —          —          —          —          30,096        30,096        —    

Commercial

     —          —          —          —          7,117        7,117        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     —          —          —          —          37,213        37,213        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total PNCI loans

   $ 4,940      $ 369      $  1,183      $ 6,492      $ 966,128      $ 972,620      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table shows the ending balance of current and past due originated loans by loan category as of the date indicated:

 

     Analysis of Originated Past Due Loans - As of December 31, 2018         
(in thousands)    30-59 days      60-89 days      > 90 days      Total Past
Due Loans
     Current      Total      > 90 Days and
Still Accruing
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $  1,675      $ 132      $ 478      $ 2,285      $ 341,511      $ 343,796      $  —    

Commercial

     431        1,200        296        1,927        1,909,054        1,910,981        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     2,106        1,332        774        4,212        2,250,565        2,254,777        —    

Consumer:

                    

Home equity lines of credit

     908        47        609        1,564        282,889        284,453        —    

Home equity loans

     1,043        24        214        1,281        31,379        32,660        —    

Other

     298        17        —          315        33,705        34,020        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     2,249        88        823        3,160        347,973        351,133        —    

Commercial

     1,053        579        1,247        2,879        225,756        228,635        —    

Construction:

                    

Residential

     209        —          —          209        90,494        90,703        —    

Commercial

     —          —          —          —          56,208        56,208        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     209        —          —          209        146,702        146,911        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 5,617      $  1,999      $  2,844      $  10,460      $  2,970,996      $  2,981,456      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

The following table shows the ending balance of current and past due PNCI loans by loan category as of the date indicated:

 

     Analysis of PNCI Past Due Loans - As of December 31, 2018         
(in thousands)    30-59 days      60-89 days      > 90 days      Total Past
Due Loans
     Current      Total      > 90 Days and
Still Accruing
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $  1,009      $ 133      $ 156      $  1,298      $ 168,494      $ 169,792      $  —    

Commercial

     1,646        1,136        1,082        3,864        704,537        708,401        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     2,655        1,269        1,238        5,162        873,031        878,193        —    

Consumer:

                    

Home equity lines of credit

     304        35        237        576        40,381        40,957        —    

Home equity loans

     74        —          —          74        3,511        3,585        —    

Other

     160        —          —          160        21,499        21,659        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     538        35        237        810        65,391        66,201        —    

Commercial

     678        145        113        936        44,532        45,468        —    

Construction:

                    

Residential

     —          —          —          —          30,593        30,593        —    

Commercial

     —          —          —          —          5,880        5,880        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     —          —          —          —          36,473        36,473        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 3,871      $  1,449      $  1,588      $ 6,908      $  1,019,427      $  1,026,335      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Interest income on originated nonaccrual loans that would have been recognized during the three months ended March 31, 2019 and 2018, if all such loans had been current in accordance with their original terms, totaled $279,000 and $285,000, respectively. Interest income actually recognized on these originated loans during the three months ended March 31, 2019 and 2018 was $33,000 and $22,000, respectively. Interest income on PNCI nonaccrual loans that would have been recognized during the three months ended March 31, 2019 and 2018, if all such loans had been current in accordance with their original terms, totaled $121,000 and $27,000, respectively. Interest income actually recognized on these PNCI loans during the three months ended March 31, 2019 and 2018 was $60,000 and $0.

The following table shows the ending balance of nonaccrual originated and PNCI loans by loan category as of the date indicated:

 

     Non Accrual Loans  
     As of March 31, 2019      As of December 31, 2018  
(in thousands)    Originated      PNCI      Total      Originated      PNCI      Total  

Mortgage loans on real estate:

                 

Residential 1-4 family

   $ 3,066      $ 308      $ 3,374      $ 3,244      $ 334      $ 3,578  

Commercial

     4,493        1,445        5,938        9,263        1,468        10,731  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     7,559        1,753        9,312        12,507        1,802        14,309  

Consumer:

                 

Home equity lines of credit

     1,366        501        1,867        1,429        885        2,314  

Home equity loans

     1,599        36        1,635        1,722        47        1,769  

Other

     28        4        32        3        4        7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     2,993        541        3,534        3,154        936        4,090  

Commercial

     3,144        332        3,476        3,755        120        3,875  

Construction:

                 

Residential

     —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non accrual loans

   $  13,696      $  2,626      $  16,322      $  19,416      $  2,858      $  22,274  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired originated loans are those where management has concluded that it is probable that the borrower will be unable to pay all amounts due in accordance with the original contractual terms of the loan agreement. The following tables show the recorded investment (financial statement balance), unpaid principal balance, average recorded investment, and interest income recognized for impaired Originated and PNCI loans, segregated by those with no related allowance recorded and those with an allowance recorded for the periods indicated.

 

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Table of Contents
     Impaired Originated Loans – As of, or for the Three Months Ended, March 31, 2019  
(in thousands)    Unpaid
principal
balance
     Recorded
investment with
no related
allowance
     Recorded
investment with
related
allowance
     Total recorded
investment
     Related
Allowance
     Average
recorded
investment
     Interest income
recognized
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $ 4,148      $ 3,481      $ —        $ 3,481      $ 55      $ 4,029      $ 6  

Commercial

     6,771        5,874        592        6,466        37        9,453        22  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     10,919        9,355        592        9,947        92        13,482        28  

Consumer:

                    

Home equity lines of credit

     1,857        1,737        58        1,795        18        1,943        4  

Home equity loans

     2,333        1,639        120        1,759        20        1,963        —    

Other

     46        —          28        28        9        33        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     4,236        3,376        206        3,582        47        3,939        4  

Commercial

     4,538        2,301        2,043        4,344        1,223        4,778        —    

Construction:

                    

Residential

     —          —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     —          —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  19,693      $  15,032      $  2,841      $  17,873      $  1,362      $  22,199      $ 32  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Impaired PNCI Loans – As of, or for the Three Months Ended, March 31, 2019  
(in thousands)    Unpaid
principal
balance
     Recorded
investment with
no related
allowance
     Recorded
investment with
related
allowance
     Total recorded
investment
     Related
Allowance
     Average
recorded
investment
     Interest income
recognized
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $ 344      $ 308      $ —        $ 308      $ —        $ 321      $  —    

Commercial

     3,089        1,445        —          1,445        —          1,456        58  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     3,433        1,753        —          1,753        —          1,777        58  

Consumer:

                    

Home equity lines of credit

     831        401        360        761        112        883        —    

Home equity loans

     242        102        122        224        50        232        —    

Other

     102        64        38        102        7        106        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     1,175        567        520        1,087        169        1,221        —    

Commercial

     335        113        219        332        219        226        2  

Construction:

                    

Residential

     —          —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     —          —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,943      $ 2,433      $ 739      $ 3,172      $ 388      $ 3,224      $ 60  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Impaired Originated Loans – As of, or for the Twelve Months Ended, December 31, 2018  
(in thousands)    Unpaid
principal
balance
     Recorded
investment with
no related
allowance
     Recorded
investment with
related
allowance
     Total recorded
investment
     Related
Allowance
     Average
recorded
investment
     Interest income
recognized
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $ 4,594      $ 3,663      $ 308      $ 3,971      $ 56      $ 3,517      $ 90  

Commercial

     13,081        10,676        1,765        12,441        42        13,115        137  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     17,675        14,339        2,073        16,412        98        16,632        227  

Consumer:

                    

Home equity lines of credit

     1,900        1,749        111        1,860        71        1,885        43  

Home equity loans

     2,374        1,892        65        1,957        2        1,520        23  

Other

     3        —          3        3        3        17        2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     4,277        3,641        179        3,820        76        3,422        68  

Commercial

     5,433        2,924        2,287        5,211        1,774        4,654        91  

Construction:

                    

Residential

     —          —          —          —          —          5        —    

Commercial

     —          —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     —          —          —          —          —          5        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 27,385      $ 20,904      $ 4,539      $ 25,443      $ 1,948      $ 24,713      $ 386  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

22


Table of Contents
     Impaired PNCI Loans – As of, or for the Twelve Months Ended, December 31, 2018  
(in thousands)    Unpaid
principal
balance
     Recorded
investment with
no related
allowance
     Recorded
investment with
related
allowance
     Total recorded
investment
     Related
Allowance
     Average
recorded
investment
     Interest income
recognized
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $ 375      $ 334      $  —      $ 334      $  —        $ 529      $ 5  

Commercial

     3,110        1,468        —          1,468        —          1,713        183  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     3,485        1,802        —          1,802        —          2,242        188  

Consumer:

                    

Home equity lines of credit

     1,027        587        367        954        127        1,120        18  

Home equity loans

     252        47        197        244        101        155        —    

Other

     106        21        85        106        11        114        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     1,385        655        649        1,304        239        1,389        18  

Commercial

     120        113        7        120        7        60        1  

Construction:

                    

Residential

     —          —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     —          —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,990      $ 2,570      $ 656      $ 3,226      $ 246      $ 3,691      $ 207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Impaired Originated Loans – As of, or for the Three Months Ended, March 31, 2018  
(in thousands)    Unpaid
principal
balance
     Recorded
investment with
no related
allowance
     Recorded
investment with
related
allowance
     Total recorded
investment
     Related
Allowance
     Average
recorded
investment
     Interest income
recognized
 

Mortgage loans on real estate:

                    

Residential 1-4 family

   $ 4,378      $ 2,678      $ 1,525      $ 4,203      $ 190      $ 4,071      $ 28  

Commercial

     11,407        9,848        1,262        11,110        154        12,510        44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage loans on real estate

     15,785        12,526        2,787        15,313        344        16,581        72  

Consumer:

                    

Home equity lines of credit

     1,478        888        527        1,415        146        1,455        10  

Home equity loans

     1,744        1,193        196        1,389        10        1,347        2  

Other

     4        —          4        4        4        6        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer loans

     3,226        2,081        727        2,808        160        2,808        12  

Commercial

     4,756        881        3,740        4,621        2,113        4,545        26  

Construction:

                    

Residential

     136        136        —          136        —          138        2  

Commercial

     —          —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total construction

     136        136        —          136        —          138        2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  23,903      $  15,624      $  7,254      $  22,878      $  2,617      $  24,072      $  112  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Impaired PNCI Loans – As of, or for the Three Months Ended, March 31, 2018  
(in thousands)    Unpaid
principal
balance
     Recorded
investment with
no related
allowance